If you’re getting your products made in China (or other Asian countries like Vietnam) you as an importer should be very concerned about whether they’re compliant with the country they’re being sold in’s safety rules and regulations.
So that’s why compliance expert Clive Greenwood stops by to discuss knowledge gaps, loopholes, enforcement, and some real-world examples with our CEO Renaud.
Any questions about your products’ compliance? We might be able to help, so let us know.
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This week we are talking with Clive Greenwood who is an expert among others in compliance and the topic today is what are the issues with compliance for most importers? Most people come to China, buy some products and don’t actually ensure that their products are compliant with the laws and regulations of the countries where they will sell them. So why is that? Why is it not very easy sometimes for the importers, what information are they missing, what should they do?
Clive nice to have you here, thanks for joining us. Can you give us a little bit of an intro about yourself?
Yeah sure, my name is Clive Greenwood, I’m the chief technical officer of WWMG associates. We are a company which specializes in standards and compliances to manufacturing industries. I myself work to help companies with their manufacturing compliance to raise their standards, to raise their quality requirements, and to push themselves into better quality, so I’ve been doing this for nearly 30 years, rather a long time and my hobby is actually reading standards!
Great, okay, so I’m sure you have seen and talked to a lot of buyers who come and let’s just say general consumer goods, furniture, textiles, electronics, and things like that for the EU, the US, for Australia, and so on, and they just come to the Canton fair or look on Alibaba and just place an order and receive the products, put them on the market in e-commerce stores, and so on, and all throughout this process they never really asked is this compliant?
First what regulations actually apply to these products in, let’s say for example, the US, and what can we do to actually make sure that it’s compliant? I’m sure you’ve seen a lot of people like this, right? Does it come from a lack of awareness of the standards, does it come from ‘let’s just do it and let’s see what happens’ sort of risk-taking attitude, does it come from greed like ‘yeah, yeah we probably should do some testing, but whatever, this is a small order whose margin doesn’t justify it,’ right? I’m sure there are all of these cases, right?
Yeah, I think generally if you wanted to take a general overview of what’s happening it tends to be that there has been a distinct ‘we need this cheap as we can get’ products to make margin, it’s not, I don’t believe, that the vast majority do not understand that they must meet standards. I believe that the vast majority rightly or wrongly assume that when they’re talking to their Chinese manufacturers, for example, and not just in China by the way, that their so-called accreditations and their certificates are in fact respective of what they actually do and that’s not the case.
Right, so too much trust maybe of the suppliers’ documents and abilities and everything and preserving the margin.
Yeah, yeah, it’s all about getting the cheapest product that they can and in a lot of cases especially with the internet this is the biggest one of the challenges that we face in compliance is that these box shifters on the internet have little knowledge of the supplier, little knowledge of the products, and literally they’re just using a very big platform as well as it turns out to push product. There are no checks or balances, the people that are buying them off the internet really have no idea that there is a standard for this product or that the supplier should comply with this, they just see a nice little CE certificate on the bottom of the page and think everything’s gonna be fine.
Naivety is a big problem, yeah. I remember years ago this was on French TV. Some journalists went to see a Chinese supplier in their showroom and their conversation went as follows: ‘Oh okay well this product is nice, and it’s for sale in the EU is that okay?’ and they were like ‘yeah yeah sure’ and ‘okay and I would need the CE logo on it.’ ‘Oh yeah yeah sure we’ll just make a little change to the mold or whatever, and you would get the CE, it’s no problem.’ ‘Okay, is this going to cost anything extra or have any implications? ‘No, no, you want the mark, you’ll have the mark.’ So the suppliers sometimes make it look extremely simple, but then last year I think a lot of people started to actually think ‘oh there are such a thing as compliance obligations’ with the PPE disasters, right, all of these masks and respirators and all other kinds of PPE products that were purchased by all kinds of traders that did not really know what they’re doing, that they were actually chasing quick profits and then there was a lot of backlash. A lot of these products were actually non-compliant, a lot of them were thrown away, is that correct?
Yes, we searched back through multiple data sources and found that
the PPE disaster was something that was well known was going to happen the exercises were running in multiple capitals across Europe and it was found that even if they had a major flu epidemic then the health service just would not cope.
Now when you looked at the start of 2020 there were some 11,000 manufacturers of masks in China and by the middle there were 64,000. Yeah because it’s so easy, you just extend your scope, right? Yeah yeah it’s so easy, now first and foremost we looked at exactly what these things are and what the performance is, now if we looked at the A strain virus then its actual size was 0.0125 nano microns, but the masks which are on the market apart from the certified medical masks and the ones at the time, in fact, were not the N95s by the way as an N95 is not a medical mask, it’s a dust mask, now that’s only good at three nano microns, you need an N99. The N99 is the medical mask, the N95 is, in fact, a dust mask and that includes 3M and all the manufacturers, but it was what was available at the time and it was ‘anything is better than nothing.’
Now what caused the problem was the inner side of these masks, especially the ones we call the surgical masks, was called melt-blown and that is a substance which is extremely difficult to control the quality of. It’s incredibly difficult to incorporate, it needs to be in sterile rooms, in zero static environments, things like this.
Simply put, there wasn’t enough of it, that became clear. So what happened, I mean I know because I directly investigated 84 companies,
is that we found that people were buying during let’s say the first quarter to the first second quarter of 2020 the explosion that there was in manufacturers of melt-blown equipment and of mass manufacturing equipment, they were just making it like they’re just popping up everywhere, but the people that were using them had no idea of what they were actually building, but it didn’t matter because no one was checking. It was ‘get me a million masks now,’ yeah, does it matter that it doesn’t work? Does it matter right now I can’t come and audit it? I need to pay 50 first? I need it now, okay I’ll do it. yeah, It’s like, okay, it doesn’t matter, just get me something. This is where this whole thing started from. I mean we traced it back at the point, is that the national stockpiles across the world, especially in the US, I mean FEMA did an appalling job, they took down their national stockpile to zero and never replaced anything, and we spoke before when we were talking about the national security implications of not having PPE. For example, I mean in 2017 no one would suggest that PPE would have national security implications, right? The trouble is there were four reports which were made by the five eyes security system where they clearly stated that they knew this would be a problem. So some people actually looked and defined the risk, and the national health service in the UK did what we called an eerie exercise, called the eerie because it means that they’re really what would happen in the event of a national pandemic or epidemic, and it showed that the national health service had probably got about two weeks and then that would be it, and this is what happened! So then you had the UK government ministers out there buying things from their mate down the pub who just turned around and said ‘well I can get you this because I know somebody in China!’
That’s really what happened, yes, it’s everywhere, ‘oh well you got a connection to some kind of manufacturer of masks? Oh, you got some stock?’ Okay let’s just buy it because we can get it to you, it doesn’t matter if it works or not, providing it’s got a CE certificate on it and even if it hasn’t, it doesn’t matter, put one on. There were huge fake documents but it didn’t really matter because no one was checking, so you got a certain explosion of manufacturers that no one could get round and check, and it was the wild west, but in reality when you look, not just in the PPE industry, although that was the straw which broke the camel’s back.
Okay, that’s for sure, but when you talk about people buying things, the first and foremost is pre-covid it didn’t cost a lot of money to send a person to China to do an investigation, it was you’re looking at 2,000 pounds, you could send a guy, one of your engineers, to go out and look at this factory. It wasn’t really that difficult, right?
So another aspect of what happened with this whole mess was that many didn’t want to spend the 2,000. They just thought ‘we will trust the supplier.’ So that comes back to the notion of ‘it’s okay they have a CE mark so if they have this it’s got to be alright.’
A lot of the blame must fall on the people who were doing the accreditations. This is where the vast major I mean the CE mark as you said before became that it doesn’t matter when in reality that was the only safeguard that the buyers had. Whether or not it was an over-trust or whether or not it was naivety or whether or not it was pure profit, I think it’s a combination of everything that happened, right?
No surveillance of the manufacturing, a lack of trained people to do audits, I mean there are not many people like me and you that can actually read a specification of 174 pages and disseminate what it actually means. I mean most people get to page four and throw it away, so there’s a lack of trained inspectors, that’s for sure, and the problem is that the people that were inspecting the vast majority of cases were actually the same company that had given the accreditation!
That is not exactly oversight, is it? Just a little conflict of interest!
If the inspector says ‘oh there’s some problems’ and then the guys will say ‘yeah but your colleagues under the third party so-called different business unit without the same the sales are okay, so what are you talking about, they’re supposed to be more trained than you? They have more hours of auditing than you.’ They discuss this with them and it’s fine, they give us the certification, it’s a perfectly acceptable actually! Oh yes, and that’s across a wide range of industries it’s not just in the medical or consumer electronics, it is across a wide range. Yes.
So I was talking about the PPE disaster because that’s really a crazy case study, but it really reveals that when everything goes wrong buyers who have no clue what they want and who don’t do the due diligence, suppliers who say ‘yes, yes, look we have a paper look at this’ and then it doesn’t say CE mark it just has a CE logo somewhere, and then let’s say it’s issued by a company somewhere in Europe, ‘look this is our CE certificate,’ and actually the buyers are not trained to read it, so they don’t understand that it’s not applicable at all as a CE certificate there was a lot of that actually.
Yeah when we start talking about the ECMS everybody saw CE, but what I take what it was saying was actually ECMS and that’s a self-declaration and means nothing, right, because it’s not applicable for this kind of product, but people do not even know, so that’s an interesting case study.
Just to finish off with the PPE, okay, because there’s still a lot of PPE being shipped out of China, obviously, and some of the measures put in place last year are still in place, right, you were telling me in the EU the customs still check the documentation of the the masks and gloves and such types of products, is that correct?
The customs have visibility of the declaration of conformity, that’s it. So if they see something that is not at the present time, you have to remember that the border control they are only inspecting 10 of everything that goes in okay, but if you’re flying in there with a 747 full of masks then they’re probably going to have a look at it, yeah, but they’re not trained and not experts in that particular field. If there are glaring differences and that’s obviously a fake, okay, but most people did not know what the fakes look like because they were quite good. You had to really understand visually, although modern-day certificates actually have QR codes in them which you can just simply scan in your smartphone and it will come up and tell you exactly what that is, and if the paperwork doesn’t line up you’ve got a problem, but the problem is enforcement it is always and as we will go on later we’ll look at new enforcement rules, the problem has been manpower at the docks, and buyers not understanding what they’re buying. The whole thing was holier than swiss cheese, and some people were experts at navigating where those holes were. You’ve got to remember there was a great deal of fraud going on, it wasn’t a lot of just people not understanding what was going on, there was a great deal of fraud, and when there is a gold mine, which happened on that one, then there will always be that, and there needs to be strong surveillance in place to make sure that doesn’t happen, and it simply wasn’t there.
Let’s stay on this topic, so let’s say I set up a business importing some again general consumer products in the EU or in the US, who might get me in trouble?
Usually it in the EU in my understanding it is the market surveillance authorities which are a different agency in every country, right, and it’s supposed to come in once in a while, have a look at the documents, have a look at what they call the technical files for any product that you have put on the market (actually you need to keep the technical file for 10 years after a product has been put on the market now). So they look through that, they check if things have been declared properly because sometimes the import duty is different and ended the check obviously for compliance.
Okay if this product here, like a Christmas lighting chain or something that might cause a fire in a home or I mean really endanger the user’s safety, how do we know that this was compliant? Okay so we have this certificate that was given to us by the supplier, we have this test report, we did our own inspection.
Well, first and foremost is that it’s actually not true that the surveillance bodies actually go and look around. What has to happen first is there has to be a number of complaints about a product for them to actually become involved, so the end customer would say ‘well look this has caught fire’ or that would have been for example the police report that someone had died because a set of Christmas tree lights caught fire and then the consumer protection agencies would then become involved, even in the EU.
The actual mechanism is that there’s a report which comes to them, they go and look at it, they don’t just go around and look themselves. The time scale between them finding a product, investigating what’s going on, and that product being removed from sale can be anything up to 18 months! It is not unless there is a major disaster where countless people are killed would you get it to move any faster. Generally what would happen next is that those agencies would then inform border agencies who would then check that product. But the concept that the border agencies check the product is wrong, they do not, it’s only unless there is a glaring problem would they take a sample of that product and have it tested.
They can’t open every container and do things, but again border agents are not product specialists, it’s more of the document review kind of level and the document review was essentially poor to non-existent. Right, and the people that were supposedly reading them didn’t know what they were reading anyway and this goes across multiple industries.
Right, the compliance to a standard is not a sticker that you put on the product, it is how the product was manufactured. I mean as to get a CE certificate on multiple different types of products you have to supply a number of samples to an accredited body, a manufacturing control plan, and off you go for the next five years. You sent out, for example, 24 samples, yes they passed, great go and make 24 million of them. There is nothing in there about surveillance of this. Yes, it passed, but if you read a lot of these standards for a lot of these certificates it says on the day and the samples that we tested they were found to be in compliance. Of course, it’s always like that with product certificates, they do testing and based on the report, based on the findings, they say Okay I certified that these samples are compliant. It doesn’t mean that your manufacturing is compliant right now. Generally speaking what should happen is that your host nation their manufacturing custom’s people actually send people in there to look at factories, not all, some do, and if they find something wrong they put it right-ish, but again they have to be in a report for them to get interested. There are no roving bands of inspectors going around saying we’re gonna make sure that this is okay! Again it comes down to the loophole which was that the accreditation bodies were simply issuing certificates and not following up, that is what happens and there’s where the loopholes were and that’s why it went wrong. Yes, exactly.
Let’s cover liability, a big heavy topic. Currently, for most consumer goods you have, I don’t know you buy some kind of product with a battery such as an e-bike. You put your e-bike in your garage and the battery for whatever reason has been damaged and there’s a short circuit during the night – boom, and it starts a fire in the home! Who is going to be responsible for that and who is actually going to be liable?
Right, the easy answer to this is that it is the person who imported the product and put it on the market.
If, for example, it has got a CE mark then you have something which is called a CE representative and his role is to make sure that that market surveillance is going on and his role is to be a point of contact. The chain of liability always ends up at the manufacturer and the chain of enforcement stops at the Chinese border in most cases if you’re buying from China, for example. When you read all the documents and the standards, the regulations, they’re written a little bit like the products are manufactured domestically and then the manufacturer did something wrong, the manufacturer is liable, but when you import from India or from China, actually it’s the importer that really put it on the markets, that assesses that the liability of the manufacturer. The right way to put it is an ‘implied liability,’ at the moment the liability of that one would be that the importer is assumed to have taken all the necessary due diligence steps to ensure that the product which he’s making available to be compliant to the standards is laid down by the nation of which it’s been imported too. Now the word there is assume, right, and that means that he’s taking responsibility, but there he is by taking such responsibility by making the pros available it is assumed that he has checked and that’s where his liability is, otherwise he is now negligent and that makes everything worse. This is why there has been a change to people buying things offline, especially people like Amazon and things like this, and I mean Taobao, all these types of internet booking places which there are millionaires were that they made the product available to the market but they actually turned and said we do not carry a liability because we’re not responsible for the content of our site, which in other words meant, we’re just making it available, but we’ve got no liability. Now that’s all changed, but this has been going on for years and it changed only very recently on the 16th of July, but this is the thing, what happened with who is responsible and where is liability always ends with the manufacturer. It always ends with the manufacturer, but it depends on which standards and things like this that we’re looking at, but in many standards now it uses the words jointly or separately and addressed the loophole. They said you guys are involved, you’re inviting me, you can’t just wash your hands with this. You actually made this product available onto the market, you should have checked, you should have known, so, therefore, you are liable and right now the courts will always try to go obviously for the highest branch on the tree, okay, and the problem is that that branch is isolated from prosecution.
They’ve got crossing borders and you have border laws and things like this to recover money from a manufacturer far away. It doesn’t matter which country it is, it’s always the same, but the liability, in reality, stops with who has got the money to pay and who can you go after. Unfortunately, you, if you are, for example, a PPE broker that’s just made all this rubbish available on the market and you bought it dirt cheap and that factory’s probably disappeared by now or maybe they went back to making socks or washing machines or something like that. Well, you are liable, make no mistake about this.
If that product is defective in any way shape or form or the documentation is fake or false or falsified you are liable. If somebody is hurt or for example and it can be proven that your product was used in a medical setting and that medical setting now has people who caught the disease and are dead, you are liable and you can be liable for manslaughter.
You can’t just think that ‘oh well I bought a million gloves and I made 500,000 pounds on this and look at me hey I’m just going to go out and buy myself a new Lamborghini!’ I would actually go out and buy yourself a new lawyer because they will come after you.
So basically if I summarize, we were kind of looking at the gaps and the loopholes. People don’t know what applies, they don’t want to pay the money, they trust the supplier too much. These are very common issues and they don’t want to pay professionals to go and do it for them. And on the enforcement side market surveillance authorities, customs border control and things like that are not as systematic as one would assume and not as proactive either and then the manufacturer in a faraway country doesn’t really care because nobody’s going to go and knock on their door and say ‘here’s the enforcement of a judgment because of a product you made that was faulty and endangered the safety of users’ so these are a number of issues we already talked about.
We’re going to do a follow-up episode where we’ll look at how compliance standards are evolving with a very concrete example that’s already in place and active and how it actually closes pretty much all of these loopholes. Thanks a lot Clive!
We are not lawyers. What we discussed above is based only on our understanding of the regulatory requirements. We do not present this information as a basis for you to make decisions, and we do not accept any liability if you do so. Please consult a lawyer before taking action.
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